Have you ever seen photos of the Mayan temples? They look like pyramids, but they have a series of steps leading up to the top. Only the most valued people in their society were allowed at the highest levels. It's the same with our credit system. Most of us are struggling down at the lower levels, paying high interest rates. But if we can move up a few steps by raising our credit scores, we gain more respectability in our credit-oriented society, and can reap the rewards of lower interest rates, lower insurance premiums, and even better paying jobs. In this article, we will provide seven steps for you to climb in order to build better credit.
Step #1: Arm yourself with the right information. When you start on your hike up the credit pyramid, be sure to take along the resources you'll need. For example, a credit repair manual or kit will provide you with proven tips and techniques for dealing with your bad credit problems.
Step #2: Find out what they know. This step is also the easiest to take. In order to fix your credit, you need to find out what your potential creditors already know about you. It's all there in your credit report (actually there are three of them, each published by one of the three major credit reporting bureaus). Go to annualcreditreport.com to get a copy of each of them, for free. Read through them to find any inaccurate, negative, out-of-date, or misleading information. It's your right to get incorrect information removed.
Step #3: Lower your balances. If you are like most of us, you are carrying high balances on your revolving credit accounts. High outstanding debt lowers your credit score. Start by cutting back on your new purchases. (Do you really need a HD TV right now?) Then start paying down the balances on those cards that have the higher interest rates. But you should not pay OFF the entire balance - it's actually better for your credit score to carry a reasonable amount of debt.
Step #4: Raise your credit limit. This step requires that you increase your "high credit limit" while you are lowering the amount you owe. One method that works is to get a sub-prime merchandise card. This is not a VISA or MasterCard, but a way to buy goods from a specific company (usually the one that offers the card) by putting down a deposit, and financing the rest of the purchase. Your new, higher credit limit will be reported to the credit bureaus, and they will raise your credit score.
Step #5: Get on the phone. Why pay a higher interest rate on a credit card when you can negotiate a lower rate? As your credit score starts to rise, you'll be surprised at how easy it will be to talk with your creditors and ask for a lower interest rate. Chances are they will say yes.
Step #6: Don't trust the banks. Watch out for overdraft fees - they are easy to incur. Did you know that an ATM will let you withdraw cash from your checking account that you don't have? You'll end up with a hefty fee every time you do it. Check your balance at the ATM before you withdraw the cash.
Step #7: Don't be late. Make late-payments a thing of the past. Starting right now, make a resolution that you will pay every bill on time. It would be a shame to have to take a few steps back down the credit pyramid just because you missed a credit card payment.
Congratulations! You've restored your good credit. How's the view from up there?
It may be time to consider getting a personal consolidation loan. Every year thousands of people default and file bankruptcy in order to eliminate debt and get a fresh start. However the consequences of this procedure are devastating to your credit and last a long time. So instead of making rush choices, take a deep breath and reflect on consolidating your debt.
Debt Consolidation Loans Explained
Debt consolidation loans are meant to aid people in bad financial situations, they let you manage your current debts, reduce or eliminate them sooner. The truth is that there are ways of reducing debt without consolidation but it make take many years to do so. This is especially true if a lot of credit card debt is involved, since credit cards interests are a lot higher than the ones charged in consolidation loans.
Debt Consolidation Benefits
A debt consolidation loan will reduce your multiple monthly payments and bills to a single installment. Moreover, the amount of money paid each month will be substantially reduced since there will be smaller interests paid, and less extra charges and other costs. However this may lead you to incur into more debt, so you have to pay special attention to this fact and avoid getting into more debt.
Credit card balances tend to increase because the option of paying the minimum is tempting but this will eventually lead to a spiral of growing debt and may easily get out of control. You should act speedily against this situation, obtain a consolidation loan, pay off and cancel all of your credit cards but one or two.
Even if you stop using your credit cards, the finance charges may be higher than the minimum payment required, thus your balance will still increase. Since Consolidation loans have lower interests this tends to help you reduce your debt, as more money from your payment is used to reduce the principle balance and less goes to interests. In a short amount of time you will end up debt free.
However, with this reduction on your debt, you may be tempted to start again spending money on things you might have been postponing. You need to refrain from doing so and destine any extra money you get to repay your debt. Once you have recovered your ability to get finance at reasonable rates you can retake again non essential expenses.
Credit Rank And Credit History
Also you will experience an increase on your credit rank and an improvement on the reports on your credit history. This is due to the fact that your debt will be reduced, you will be paying fewer interests and above all you will have less loans and debts outstanding and less creditors on your back.
Also, the monthly payments on your consolidation loan will keep reducing your debt and be recorded on your credit history. As time passes, your credit score will keep rising till you reach a good credit tag and your credit report will be shiny and clean from those previous stains. It is not such a long process if you have discipline and make sure not to miss payments and avoid paying late.
Both Jay Peters & Melissa Kellett are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Jay Peters has sinced written about articles on various topics from Bad Credit Loans, Free Credit Report Score and Credit Counseling. To learn how to borrow up to $15,000 with just your signature, visit the author's website: . Jay Peters's top article generates over 40500 views. to your Favourites.
Melissa Kellett has sinced written about articles on various topics from Credit Home Loan, Debts Loans and Health. Melissa Kellett is an expert loan consultant who has worked for twenty years in the financial industry and helps people to repair their credit and get approved for home loans, unsecured personal loans, student loans, consolidation loans, car loans and man. Melissa Kellett's top article generates over 40500 views. to your Favourites.